Co-orporate and Business Law

Co-orporate and Business Law

Ari himself is now in financial difficulty and needs additional cash to maintain his business
operation.

Required:

Advise Ari whether, in the context of contract law, he can recover any of the outstanding
money from Bi, Cas and Dex.

(10 marks)

Ans. Important case

Pinnel's Case [1602] 5 Co. Rep. 117a,[1] also known as Penny v Cole, is an important case
in English contract law, on the doctrine of part performance. In it, Sir Edward Coke opined that a part
payment of a debt could not extinguish the obligation to pay the whole.

The plaintiff sued the defendant (promisee) for the sum of £8 10shellings. The defence was based on the

fact that the defendant had, at the plaintiff's (promisor) request, tendered £5,2shellings,6dimes before the

debt was due, which the plaintiff had accepted in full satisfaction for the debt.

The rule in Pinnel's Case is that:[1]

payment of a lesser sum on the day in satisfaction of a greater, cannot be any satisfaction for the
whole, because it appears to the Judges that by no possibility, a lesser sum can be a satisfaction to
the plaintiff for a greater sum: but the gift of a horse, hawk, or robe, etc. in satisfaction is good... [as]
more beneficial to the plaintiff than the money. “

Following situations are necessary to understand to answer this case:

(i) payment in kind
Consideration can take the form of money or money’s worth. In other words,
something or action may adequately support a
promise, and A may clear an existing debt if B agrees to accept something else
instead of money. It is important to note that payment by cheque is no longer
treated as substitute payment in this respect (See D & C Builders Ltd v Rees (1966)
).
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(ii) payment of a lesser sum before the due date of payment Such payment has of
course to be acceptable to the party to whom the debt is owed.

(iii) payment of a lesser sum by a third party
Where a third party intervenes to pay off the existing debt, albeit with a lesser sum,
then the original creditor is not allowed to break their agreement with that party by
taking subsequent action against the original debtor (Welby v Drake (1825)).

(iv) a composition arrangement
This is an agreement between creditors to the effect that they will accept part-
payment of their debts. As they have entered into a binding agreement to that
effect, the individual creditors cannot subsequently seek to recover the unpaid
element of the debt (Good v Cheesman (1831)).

(v) promissory estoppel
The equitable doctrine of promissory estoppel sometimes can be relied upon to
prevent promisors from going back on their promises.

1 ) Bi

As Ari agreed to accept Bi’s offer to do his accounts as part payment of his outstanding debt
there is nothing further he can do to recover any more money. By accepting payment in kind his
situation is covered by exception. Consideration can take the form of money or money’s worth.
In other words, something or action may adequately support a promise, and A may clear an
existing debt if B agrees to accept something else instead of money. It is important to note that
payment by cheque is no longer treated as substitute payment in this respect.

When a party to a contract has refused to perform, or disabled himself from performing
his promise in its entirety, the promisee may put an end to the contract, unless he has
signified, by words or conduct, his acquiescence in its continuance.

2) Cas
When a third party intervenes to pay off the existing debt, albeit with a lesser sum, then the
original creditor is not allowed to break their agreement with that party by taking subsequent
action against the original debtor.

By accepting lesser payment from a third party, i.e. Cas’s father, Ari is covered by exception and
he can take no further action against Cas.

When a party to a contract has refused to perform, or disabled himself from performing
his promise in its entirety, the promisee may put an end to the contract, unless he has

signified, by words or conduct, his acquiescence in its continuance. (he agreed to the
proposal and put an end to the contract)

When a promisee accepts performance of the promise from a third person, he cannot
afterwards enforce it against the promisor.

3 )Dex

Dex acted unilaterally and did nothing additional to compensate Ari for his part payment.
Consequently Dex is covered by the general rule in Pinnel’s case and remains liable to pay Ari
the remaining half of his bill.